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ACCC v Jewellery Group Pty Limited

Jewellery Group was successfully sued by the ACCC for misleading or deceptive conduct in relation to dual pricing.

Dual pricing involves ticketing an item with a “Was” price and “Now” price. In this instance the “Was” price was not the standard retail price that the item was actually sold for in the non-sale period.

Engaging in dual pricing practices in a misleading way could have significant consequences including defending well-publicised and costly enforcement proceedings brought by the ACCC

Jewellery Group, operator of retail jewellery store Zamel’s, was recently held to have engaged in misleading and deceptive conduct in relation to its use of “dual pricing” in a number of catalogues and flyers published between November 2008 and May 2010. The Court is yet to determine what relief it will grant, however the ACCC is seeking declarations and civil penalties against Jewellery Group.

Dual Pricing

The impugned Zamel’s catalogues and flyers identified a higher price for each advertised item of jewellery which was either struck through (Strikethrough Price) or struck through and marked “was” (Was Price), together with a lower price for that item marked “sale” (Sale Price) or “now” (Now Price). The Court held that there was no relevant distinction in the representations conveyed by the Strikethrough/ Sale Price advertisements and the Was/Now Price advertisements.

Relevant class of consumers

The parties agreed that the relevant class of consumers comprised readers of the catalogues and flyers, some of whom would be aware of the use of dual price advertising by retail jewellers (Aware Customers) and some of whom would be unaware of this practice (Unaware Customers). The Court also accepted that many of the Aware Customers would also be aware that retail jewellers frequently sell jewellery at a (sometimes substantial) discount to the ticketed price (this being the Strikethrough/ Was Price), while the Unaware Customers would not be aware of this fact.

Savings Representation conveyed by use of the dual pricing

The Court held that Aware Customers would understand that they could buy the advertised items at any time at the Sale/ Now Price, or at least at a price less than the Strikethrough/ Was Price, and were thus unlikely to be misled or deceived by the use of dual pricing.

However the Court held that the impugned advertisements represented to Unaware Customers the saving between the Strikethrough/ Was Price and the Sale/ Now Price which was available to the customer if they purchased one of the advertised items during the sale period (the Savings Representation).

The Court rejected Jewellery Group’s submission that the Strikethrough/ Was Price simply represented the price at which the advertised items were offered for sale prior to the relevant sales period, and did not represent the price at which those items were actually sold. Instead, the Court held that while the Sale/ Now Price was an offer price, the Strikethrough/ Was Price was not. Rather, the Court held that the Savings Representation must be directed at Unaware Customers and that while Aware Customers might understand the Strikethrough/ Was Price as an offer price open to negotiation, by definition Unaware Customers would not have this understanding. In the Court’s view the clear purpose of the dual pricing was to draw the Unaware Customer’s attention to the stark differences between the Strikethrough/ Was Price and the Sale/ Now Price so as to encourage them to purchase the advertised item during the sale period.

The Court was not swayed by the fact that the ACCC had not led any evidence from particular consumers indicating that they had understood the Savings Representation to be conveyed by the use of dual pricing in the catalogues and the flyer. The ACCC was not bound to call such evidence and the Court held that it was reasonable for the ACCC to ask it to make a finding on the basis of the understanding of a reasonable member of the relevant class.

Savings Representation false

The Court held that the Savings Representation was false, and misleading or deceptive, on the basis of sales data which indicated that in respect of the 44 advertised items the subject of the proceedings, 22 had never been sold at the Strikethrough/ Was Price in the 4 months leading up to the relevant sales period, and that for all items except one, the number of sales that actually occurred at the Strikethrough/ Was Price during this 4 month period was no greater than 10% of the total sales of that item.

The Court concluded that the Strikethrough/ Was Price was rarely paid by Zamel’s’ customers and that accordingly a significant number of Unaware Customers to whom the Savings Representation was made, contrary to this representation, would not in fact have made the represented savings had they purchased during the sale period. The Savings Representation was thereby false and misleading or deceptive.

Learnings from the case

Advertisers must be careful when using dual pricing and it may be worth bearing the following considerations in mind:

While dual pricing is not illegal, when it is used, the advertiser is likely to be found to represent to consumers that when purchasing the advertised item in the relevant period they will receive a genuine saving. Where the Strikethrough/ Was Price is not genuine, this representation is likely to be false, and misleading or deceptive, in contravention of the Australian Consumer Law.

Dual pricing is a practice that is closely scrutinised by the ACCC.

When using dual pricing, it is best practice to calculate the Strikethrough/ Was Price by reference to the prices at which the advertised items were actually sold, rather than the ticketed prices at which the items were offered for sale.

Particular care must be taken when the advertiser intends to calculate the Strikethrough/ Was Price on the basis of ticketed offer prices rather than actual sales prices. At a minimum, evidence will need to be kept demonstrating that the advertised items have been offered for sale at the Strikethrough/ Was Price for a reasonable period of time immediately before the promotion. Furthermore, if the advertised items have been offered at various prices during the relevant pre-sale period, then the lowest offer price during that period should be used.

Compare jurisdictions: Litigation: Enforcement of Foreign Judgments

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